The Three Rising Valleys pattern is one of the most popular patterns in technical analysis because it can bring high profits to traders. However, many people still do not know how to use this pattern effectively. In this article, I will introduce you to the Three Rising Valleys, its meaning, strategy, and trading examples.
What is the Three Rising Valleys pattern?
The Three Rising Valleys pattern usually occurs after an uptrend that reinforces the previous trend. But it can also be after a downtrend to signal an impending reversal. However, this pattern is often highly effective in bull markets because it tends to create further upward momentum for the price.
The pattern has 3 valleys. The low of the second valley is higher than the low of the first one. And the low of the 3rd valley is higher than the low of the 2nd. The valleys are approximately the same width. A buy signal occurs when the price closes above the 2nd peak.
The market sentiment of the Three Rising Valleys pattern
After a sharp drop or downtrend, the price starts to recover again. In an uptrend, you can see higher highs and higher lows. When the Three Rising Valleys pattern is formed, the 2nd high in this pattern is higher than the first and the 2nd low after creating the first high is also higher than the 1st low.
Thus, the conditions for the appearance of an uptrend by definition are complete. It shows that the buyers are starting to come back to push the price up steadily before forming a more obvious uptrend in the near future.
When the price breaks above the second high, many traders will place orders with the expectation that the next high will be higher. Thereby, the uptrend will once again take place.
How to trade with the Three Rising Valleys pattern
With Three Rising Valleys, we only have the option to find the point to open bullish orders. If the price breaks out and closes above the 2nd high, the pattern is confirmed. This is the best opportunity to open a bullish order right away, predicting that the price will continue to increase. Add volume indicators on the chart to accurately identify breakouts, avoiding price traps from the market.
– Stop loss is placed at the 2nd valley
– Take Profit should be at least double the distance from the entry point to stop loss.
If you are a trader who prefers safety in each order, you can wait for a downside correction to the 2nd peak to enter a bullish order with the lowest risk.
I hope that the above article has provided the necessary information for you to understand the Three Rising Valleys pattern, its meaning, and strategy. To trade more effectively and safely, traders should combine it with technical analysis indicators and always place stop-loss orders to minimize unnecessary investment risks. Besides, remember to test this strategy on a demo account first before using it in real trading.
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